Tax

A notable omission from Localise West Midlands’ extensive range of articles about, or with references to localism, is a review of a book bySimon Jenkins:Big Bang Localism: a rescue plan for British democracy.

In this book he attributes the decline in British voter interest and participation to the over-centralisation of power in Whitehall, ‘one of the most centralised governments in the West’. As turnouts in elections are dwindling, he notes, many are turning to ad hoc pressure groups and direct action.

Centralisation has not worked well, Jenkins believes; levels of satisfaction with health care, education and policing are lower in Britain than almost anywhere in the developed world. He notes a change in public opinion which once, on the whole, believed that the British government works well and is now shifting to a belief that it needs improving, citing contemporary YouGov polls showing a rise in discontent with public services and health care

Twelve years later the need to heed Jenkins’ pre Corbyn message has never been greater as the established on the political left and right frantically attempt to discredit and unseat a democratically elected party leader.

He noted that Britain’s local councillors are outnumbered three-to-one by 60,000 unelected people serving on roughly 5,200 local quangos, managing various functions that may be local but are no longer under local democratic control. Examples include health service, housing, prisons, training and economic development.

Jenkins points out that, across Europe, countries have spent the past two decades refreshing their local democracy – even traditionally centralised countries like France have devolved. The USA operates the most decentralised system of government and in these countries, public services are delivered more locally than in Britain – and win greater public trust as a result.

He sets out a programme for a ‘democratic Big Bang’, to return power to the local level, including control over health, police and education services, to re-enfranchise the British people:

Counties and cities should run:

health services

secondary schools

policing

the prison and probation services

youth employment and training

planning.

Municipalities and parishes should run whatever gives a community its pride and visual character:

primary schools

old people’s homes

nurseries and day-care centres

clinics and surgeries

parks and sports centres.

Local services should mostly be funded by local taxation, which should be raised from a combination of:

residential property tax

business rates

local income tax.

Jenkins proposes that central government funding of local services should take the form of a block grant, determined by the Local Democracy Commissioner and paid to local authorities with no strings attached.

The “enemies of localism” are vested interests and the national media, but devolution in Scotland and Wales shows that people prefer decisions about local services to be made locally.Simon Jenkins recommends that the Big Bang should start with a “bonfire of central controls” and an end to targets and official league tables, adding “Big Bang Localism is the answer to the failure of Britain’s public services and the loss of faith in British democracy”.

In March LWM’s co-ordinator reported the local interest in the potential of a Birmingham Pound – the Birmingham Mail following up one tweet about a first-stage meeting of a few potentially interested people. News of an increasingly well-developed scheme in Bristol gives an insight into the role of a local currency.

The Financial Times reported recently that the “Bristol pound” is beginning to take root and ‘count’ in the local economy.

There are now about 1,200 members with Bristol pound accounts. Around 900 businesses in the city accept the currency including:

the local bus company which accepts Bristol pounds;

the council which accepts the local currency for council tax;

Good Energy, which takes the local currency as means of payment;

Yurt Lush, a Mongolian themed restaurant, which this month became the first business to pay its electricity bill using Bristol Pounds;

the council which will give staff who opt for this, all or part of their salary in Bristol pounds; George Ferguson, the mayor, is paid in the currency.

The Bristol Pound was launched in 2012 to support local business and reduce the environmental impact of long supply chains. There are notes of £1, £5, £10 and £20 denominations and someone opening an account with the Bristol Credit Union deposits sterling and is credited with an equal number of Bristol pounds. This money can be cashed, or drawn on electronically to pay bills online or via a mobile phone.

A case history from the FT:

The organisers say because the credit union is regulated by the Financial Conduct Authority, Bristol pound deposits will enjoy the same protection as an ordinary bank account.

The Fair Tax Markis being adopted by UK business setting a new standard in responsible tax practice – from the smallest shop to the biggest multinational. It is the label for good taxpayers – companies and organisations that are proud to pay their fair share of tax.

The Fair Tax Mark is an assurance that a company is open and transparent about its tax affairs and pays the right amount of corporation tax at the right time in the right place. It has been awarded to several companies, including:

SSE, the UK’s broadest-based energy company;

Go Ahead Group, a FTSE250 UK company that operates train and bus services;

Unity Trust Bank, a specialist bank for social economy organisations and the wider civil society;

Lush Cosmetics, a multinational manufacturer and seller of handmade cosmetics;

Midcounties, the largest independent co-operative society in the UK, operating a range of businesses in Food, Travel, Pharmacy, Funeral, Childcare, Energy, Post Offices and Flexible Benefits;

Urban IT Support, a small firm providing easy-to-understand computer, network and mobile device support to homes and businesses;

and The Phone Co-op, the only telecoms provider in the UK that is owned and run by its customers.

Acceptance of these edicts as inevitable by the three main political parties has consequences:

it drives down tax rates,

worsens social and environmental conditions

kills local jobs

and reduces small business opportunities.

Whistling in the dark to keep up the nation’s economic spirits: promising hi tech export-led growth in an era of rising Asian dominance is the last colonial delusion

The alternative is to propose a set of practical measures for protecting and re-diversifying local economies by limiting what goods they let in and what funds they choose to enter or leave the country.

In the process they will wean themselves off of their export dependence. This will allow space for domestic funding and business to meet most of the needs of the majority in society.

Proposing policies that would result in the grounding of manufacturing, money and services here in the UK would enable politicians and activists to call the bluff of relocation-threatening big business and finance, who at present have the whip hand over all politicians who support open markets.

This is the only way to tackle the economic and environmental crises, return local control of the economy to citizens and provide a sense of security and hope for their future. If implemented it could play a crucial role in seeing off the rise of the extreme right, as this invariably flourishes when the sense of insecurity within the majority worsens.

Forthcoming book

Progressive protectionism can tackle this insecurity far more effectively than any of the policies offered – at present – by parties of any political hue

The money markets would ferociously destabilise the challenge posed to their present dominance of the world economy by introducing progressive protectionism in one country alone. Europe is facing huge threats from the forces of international finance, yet the continent would be a powerful enough bloc to implement a programme of progressive protectionism, particularly if the politically active started to campaign for it.

Prem Sikka, Professor of Accounting at the University of Essex Business School sends the news that the Twitter age is about to chalk up its first success in the grey world of corporate accounting.

In an article in The Conversation, he records that – for the first time – activists have demanded and secured a standard against the wishes of the accountancy establishment.

Bloomberg has reported that the European Union will adopt country by country (CbC) reporting to enable citizens to scrutinise corporate practices and ask critical questions. The aim is to make large companies disclose the taxes they pay and profits they make on a country-by-country basis.

Going through the usual channels

Meetings were sought with the more traditional accounting standard setters, such as the International Accounting Standards Board (IASB) and the Financial Reporting Council (FRC), but they showed no interest.

Sikka records that considerable opposition came from the professional accountancy bodies, major accounting firms and corporations. The Institute of Chartered Accountants in England and Wales was vehemently opposed to it. Deloitte said “we do not believe that imposing incremental country by country disclosure in financial statements prepared under IFRSs is warranted”.

A survey in 2010 did not show enthusiasm for CbC among FTSE 100 directors. The usual arguments were that disclosure would be costly, even though companies should already have the information about the performance of their subsidiaries in each country of their operation. The cost of publishing this internally held information is negligible.

The ‘civil society’ process

In 2003, Professor Sikka – as director of the Association for Accountancy and Business Affairs (AABA) – encouraged Richard Murphy of Tax Research UK, a chartered accountant, to make the first draft of a proposal that could highlight flight of capital, profits and the mismatch between profits, employees, assets and tax. The draft was published in later 2003 and has continued to be refined.

The main turning point was the support given by NGOs, such as Christian Aid, Publish What You Pay (PWYP), War on Want, Tax Justice Network, Oxfam and many others, in the UK, the EU, developing countries and the US. The credit for this must go to Richard Murphy. This campaign was joined by some Members of the European Parliament (MEPs) and also Labour MPs. Sikka adds:

“Much to the dismay of the accounting establishment, their pressure persuaded the EU to launch a consultation exercise in 2010 and has now resulted in partial implementation of CbC. No doubt, there is more to come”.

CbC is the culmination of a decade-long campaign by civil society organisations in the social media age. When fully enacted, it will be the first accounting standard formulated and developed by civil society rather than the traditional accounting standard setters.

He concludes that in the digital era it may well be possible to mobilise alternative centres of power . . .

Some Localise West Midlands members who have a particular interest in economic and political devolution, will welcome the call of a district councillor (also green economist and professor at Roehampton University), for more decision-making powers to be devolved to regional level.

Cllr Scott Cato, who represents Stroud’s Valley ward and has been selected as the lead candidate for the Greens in the 2014 European elections, believes the south-west should have more freedom to shape its food, energy and economic policies. At the south-west Green Party AGM in Exeter she said:

“If the debate is about competencies and levels of government then it is time to add a green tint to that debate by calling for the end of the centralisation of power in the UK as well as in Europe as a whole.” She added:

“On a whole range of issues from agriculture and taxation to transport and economic development we need to have more power at the local level.”

David Dewhurst, Peter Dombi and Naomi Colvin, members of the economics working group at Occupy London write in the Financial Times:

The world faces an economic crisis and problems in our political system have prevented it from being tackled in ways that protect the interests of the majority of its population.

Across the developed world, higher levels of inequality are associated with social ills such as crime and mental illness. Ultimately, we believe that all of us fare better when wealth and income are more equal.

We reject austerity as a route to economic recovery and call for genuinely transparent and effective regulation of the banking system so that its structural problems can be tackled once and for all.

Specific breaches of the social contract

This month we’ve had figures from across the political spectrum attest to the positive contribution Occupy London is making to the national discussion. Yet still we are accused of lacking substance. In fact, we can point to specific breaches of the social contract and how to fix them. Here are three examples:

First, tax avoidance is endemic in the UK. Companies use complicated structures to hide their earnings from HM Revenue & Customs. Individuals stash money abroad while enjoying all the benefits of living in this country . . .

How to fix it: (C)reate a tax base for UK companies aligned with a level of activity that actually occurs in this country rather than relative tax advantages . . .

Second, housing is increasingly unaffordable and the social costs of homelessness are enormous . . .

How to fix it: The Bank of England should use quantitative easing, not to buy gilts in the forlorn hope it will stimulate the economy but to fund housebuilding . . .

How to fix it: The metrics by which bonuses are calculated must be changed, not just in banking but across the corporate sector . . .

As Andrew Haldane of the Bank of England has pointed out, if bankers’ pay were linked to return on assets it would be much closer to median household incomes than if based on return on equity. We are also looking at the feasibility of directly linking executive pay with average or minimum wages in the company, or even in the country as a whole.

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A substantial critique of government policy will become an ever more important task for Occupy London as the political debate moves in our direction. Our movement started in a group of tents in St Paul’s churchyard, but it will not end there – the issues that brought us together are still far from resolved. This year we will show that we cannot only pose questions but also have them answered.